Auto Title Loans: Reviews & Comparisons
Need cash fast, but have bad credit? Auto title loans might be the answer to your problem. Auto title lenders will lend money even to applicants with low credit scores, and can often get you your money within 24 hours.
But there's a catch. Auto title lenders know that their borrowers are desperate. As such, many auto title loans feature predatory rates and unrealistically short terms. There's a reason that 1 in 5 borrowers default on their auto title loans, ultimately losing their car in the process.
So how can you sift through the dangerous or impractical loans to find an affordable offer with reasonable rates and terms? We'll show you what to look for. Read on to learn how to compare auto title loans.
Let's start with the basics: what is an auto title loan?
What is an auto title loan?
An auto title loan is a short-term loan that uses your car as collateral. Because the loans are secured by collateral, their eligibility criteria are very loose. You don't have to have a bank account or a high credit score, and auto title lenders will rarely check your debt-to-income ratio. As long as you own the title to your car, you can probably find an auto title lender who will approve your request.
However, all that flexibility comes with some downsides. Because auto title lenders lend to high-risk borrowers, they counteract their losses with high interest rates. The average auto title loan is for $700, with an APR of 300%.
Are there different types of auto title loans?
Yes! Auto title lenders offer single-payment loans and installment loans.
Single-payment loans typically have a repayment term of about a month, with APRs sitting around 300%. Needless to say, these loans are high-risk. 80% of borrowers find themselves unable to pay off their loan on time and are forced to take out a new loan to pay off the old one. This can result in a dangerous cycle of debt.
Installment loans are not always available from auto title lenders, but when they are, they are absolutely preferable. They give borrowers more time to pay off their debt, and feature slightly lower interest rates (around 259%).
How do auto title loans work?
The way auto title loans work is as follows:
- You apply online or at the lender's location.
- The lender does an appraisal of the fair market value of the vehicle and offers you a maximum loan amount based on the car's value. For example, the lender may cap your loan at 50% of the value of the car, or some other percentage.
- You get your cash to cover your need and plan to repay the loan based on its terms.
- If you don't repay the loan on time or miss a payment, the lender may repossess the car.
What should you look for in an auto title loan?
Not all auto title loans are created equal. Some are safer and more reputable than others. When you compare auto title loans, consider the following factors:
What do you need to qualify for an auto title loan?
Although criteria is looser than with conventional loans, auto title loans still have some requirements. You'll probably have to show lenders that you have some form of income to prove your ability to repay the loan.
Also, because auto title loans are so risky, they are banned in some states. If you're looking for a loan, you should first confirm that your state allows them. Then, make sure that your lender of choice issues loans in your state.
Other typical requirements include:
- A car in driving condition.
- Proof of insurance.
- A clear title.
- Proof of address.
- A valid ID.
What are the rates of auto title loans?
As we've established, auto title loans usually have very high APRs. However, some are higher than others. Be sure to do your research to find an auto title lender with relatively affordable interest rates.
Not sure where to start? SuperMoney has put together a list of top auto title lenders where you can compare their rates side by side. Check it out:[dcb id=56869]
What loan amounts can you get with an auto title loan?
Different lenders offer different loan amounts. One might offer loans of $500 to $5000, while another might loan from $1000 to $25,000. Make sure that your chosen lender offers loans that suit your needs.
Also, remember that your loan will be backed by the value of your car. As such, you probably won't be able to borrow more than 50 - 60% of your vehicle's value.
What are the loan terms of an auto title loan?
Most single-payment auto title loans have a loan term of 30 or so days. Lenders that allow you to pay in installments give you a little more time -- maybe two or three months. Seek out a lender who gives you enough time to pay your debt. And never take out an auto title loan if you're not 100% sure that you'll be able to pay it off on time. Otherwise, you might lose your car after having borrowed only a fraction of what it's worth. Plus, defaulting on a loan will tank your credit score.
What are the fees of auto title loans?
Auto title loans come with a variety of fees. Lenders must disclose the finance charge, which is added onto the cost of the loan. But other fees may hide in the fine print. Car title lenders may charge processing fees, document fees, late fees, loan origination fees, title charges, lien fees, and more.
Seek out a lender who charges few fees, and whose fees are relatively low. Read the fine print, and ask your lender to list out all the fees they charge before you commit.
What do past customers say about auto title loans in their reviews?
This is a big one. Auto title lenders have a reputation for predatory business practice, and for good reason. But there are lenders out there who are relatively flexible, understanding, and reliable. The only way to know what you're getting into is to read honest, unbiased reviews from past customers.
Look for a lender with mostly positive reviews (or, failing that, one without strongly negative reviews). If many past customers have cited the same problem, odds are good that you will encounter it too.
Putting it all together
Auto title loans are a dangerous but helpful option in moments of crisis. For example, if you need money for a medical operation and your paycheck won't arrive until the end of the month, an auto title loan might save the day! But if you're not sure how you'll pay the loan back, you might be better off just selling your car. Odds are good that you'll lose your car either way, and selling it will yield higher profit.
If you're set on an auto title loan, be sure to do your research. Confirm that your prospective lenders work in your state, and compare their rates and terms. Make sure that the loan amounts that they offer are high enough, and check for hidden fees. Plus, always read customer reviews. Learning from the experiences of others is the best way to avoid disreputable lenders.
Ready to get started? Click here to compare auto title lenders side by side.
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